American Water Works

Utility infrastructure in the US badly needs repairing and updating and AWK is part of the modernisation of the industry. Investment by AWK to refresh and replace its asset base will generate financial returns.

Investment by the company is split between maintaining existing infrastructure as well as strengthening the US water and wastewater system through resilience spending (dealing with leaks and floods) and investment in water quality projects to help meet tightening regulations.

There are tens of thousands of companies involved in the US water and wastewater industry, which gives a large, efficient operator like AWK the opportunity to increase scale through sensible acquisitions.  
The water and sewerage industry is growing steadily; it’s also what is called “defensive”, in that sales and profits are not affected by cyclical market trends.

The company is a reliable creator of long-term shareholder value and AWK has increased its dividend every year since 2008, qualifying it as a Dividend Aristocrat and we think it can generate attractive growth over the next few years.

American Water operates in a sector that is entwined with our built and natural environment. Delivering water and wastewater services is both energy-intensive and by necessity, results in treated water being discharged back into the environment.

Managing and growing its network of infrastructure in an energy efficient way is therefore of the utmost importance, however close monitoring of carbon and waste volumes will remain a priority area of engagement. Failure to adhere to their own processes and local regulations could result in pollution incidents, potentially harming biodiversity, resulting in financial, legal or public health consequences. 

Climate change further adds complexity, with increased droughts and flooding requiring resilient infrastructure and long-term adaptation planning.

Affordability and equitable access remain key challenges in the sector with many communities facing barriers to reliable and affordable supply. In the US, indigenous rights are also an important consideration, particularly where water infrastructure intersects with traditional lands or cultural sites.